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October 10, 2017

WE ARE A LONG WAY from the fiscal apocalypse of the early and mid 2000s, when airline after airline was going insolvent, filing for bankruptcy or shutting down altogether. That bleeding has stopped. Carrier consolidations, together with better capacity control and low fuel pries, slowly but surely nudged things into the black, and here we are. Less than twenty years after its darkest days, the airline industry has never been more profitable.

It depends, though, which sectors of the business we’re talking about, and in which parts of the world. The American carriers are arguably the healthiest of all — which is maybe a little unusual, historically speaking — but look elsewhere and you’ll see that many companies are floundering. Alitalia is on life support. AirBerlin is shutting down. Last week, Monarch Airlines, a prominent U.K. charter carrier, ended operations after 49 years.

Different forces are in play here, including geopolitical ones. Monarch cites fears of terrorism in Tunisia, Egypt and Turkey (perennial holiday destinations for Brits), as the major reason for its demise. Most of the drivers, though, come from within the industry itself.

The one we hear about most often is pressure from the Persian Gulf carriers — Emirates, Etihad, and Qatar Airways. Owned and supported by their governments (the United Arab Emirates in the case of the first two; Qatar in the other), these airlines have seen massive expansion over the past decade. They operate immaculate, luxuriously appointed jets to every corner of the globe, with excellent service and affordable — some would say predatory — fares. They also are blessed with ideal geographic positioning. Their hubs, equidistant between the world’s most populous regions, are perfectly placed transit points for the millions of people traveling between Europe, Asia, Africa and the Americas.

Then you’ve got the low-cost carrier (LCCs) effect. The proliferation of the LCC, perhaps more than any other factor, has radically transformed the competitive dynamic. In shorter-haul markets, LCCs have been throwing their weight around for some time. Companies like Spirit Airlines in North America, EasyJet and Ryanair in Europe, Gol in South America, and AirAsia in the Far East, have been rewriting the rules for two decades, forcing the legacy carriers to compete on their terms, and not vice-versa. But now, and perhaps ominously for some, the LCC model has begun to take hold in the long-haul arena as well.

This is unprecedented stuff. “Low cost carrier” and “long-haul” were once mutually exclusive concepts. Historically, long-haul LCC ventures have not ended well — Laker Airways and Tower Air were two companies that bit the dust trying. But that is changing. Air Asia X, Norwegian Air Shuttle, Scoot, and Icelandic upstart WOW air (the lowercase a affectation is theirs, not mine), are among those showing that ultra-cheap fares and transoceanic distances can be a winning formula. The traditional LCC fleet of single-aisle A320s and 737s is now being supplanted with widebody 787s and A330s.

There’s a lot at stake here. Should this sector continue growing at its current pace, the long-haul playing field could be fundamentally different in just a few short years.

How they’re making it work, though, has in some cases raised eyebrows and ignited controversy. Critics argue that the fast-expanding Norwegian Air, for instance, has been competing unfairly on routes across the Atlantic, taking advantage of regulatory loopholes and employing low-wage crews from developing countries. For now regulators have given Norwegian the green light.

Good management, streamlined operations, subsidized aircraft leases, cheap labor, legal loopholes… Whatever is responsible for the LCC model becoming so suddenly successful on longer routes, we can’t leave out the issue of fuel prices. This is maybe the most influential factor of all — and one that might eventually bring them down. We wonder if the WOWs and Norwegians of the world could be selling those $199 round-trip fares if jet fuel wasn’t so absurdly inexpensive. Should prices spike, and at some point they will, it remains to be seen how many of these carriers will be able to hang in.

Unfortunately, for a number of airlines currently struggling, it might already be too late.

Upstart airlines come and go, we expect that. But I especially hate it when established, old-time carriers fail. Monarch Airlines wasn’t anything legendary, but 49 years is a long time in the airline world. This was an airline that once flew the BAC One-Eleven and the Bristol Britannia. In the early 1990s, Monarch jets were a frequent sight at the airport in Bangor, Maine, of all places, where I spent a lot of time in my regional pilot days. A300s, usually. The A300 didn’t have the longest legs, and BGR made for a convenient refueling stop on routes between the U.K. and Florida.

TWA, Swissair, Sabena, Varig, Malev and Mexicana are some of the storied names that have disappeared during the past 15 years or so.

15 Responses to “Another One Bites the Dust”

TWA (coast to coast flights – they were one of the few nonstops LAX-PHL). The last time I flew that route, the plane was nearly empty and I had a whole row of seats to myself. The nice FA gave me a second dinner too!

National – up and down the east coast. That was a fun airline.

And… Drumroll please…

ALM Antillean Airlines. Twice, in 1989 and then in again in 1990 I flew them from San Juan PR to Aruba and back. I think that’s my prized one because it was kind of an obscure airline.

I remember Laker – I think it was called Laker Skytrain at the time. I was planning a Europe trip and they had that super low fare. At the time I was only 17 and could handle adverse conditions like budget airlines lol. But I didn’t end up going until much later and by then Laker Skytrain was gone.

These days I like to go to London and Paris and eventually Munich and Amsterdam but there’s no way I can fit in Steerage for 10+ hours! “Premium Economy” on the flag carriers is a pretty good compromise between Steerage and Business.

As a plane spotter in and around London in the mid to late 70s I used to go, with friends on the bus, to London Gatwick where Monarch were based. I have fond memories of their fleet at Gatwick, loved the livery.

I remember Tower Air with such great fondness. My friends and I used to fly between SF and New York for various parties and events with great frequency. We could only do this because Tower was SO CHEAP. What I loved most was one could upgrade to First Class and sit upstairs for only $50 on the day of the flight. I’d arrive hours early (and this is before TSA screening so people rarely arrived more than half hour early), upgrade, and then go relax at the airport (both SFO and Kennedy have some great spaces to relax at). I loved ascending that spiral staircase.

Of course, not all was great. The airline frequently cancelled flights if they didn’t have enough people. The first time this happened, I had arrived four hours early to Kennedy for my flight home to SFO and was told the flight was cancelled. I was so upset I walked to their offices, which were at that airport, though a VERY long walk. When I arrived, I approached the receptionist and demanded to speak to who ordered the cancellation. From the office behind her stormed out Morris Nachtomi who screamed at me for questioning his decision. We had quite a shouting match and I like to think I gave as good as I got, but we both eventually just sort of wore each other down. Finally, after we stood silently for a few seconds, I said, “So, we fly tomorrow then?” He looked at me and said, “For you, yes, we fly tomorrow.” Say what you want, I doubt Juan Trippe would leave his office to argue with a customer.

My first LCC was PeoplExpress. They had fares of $99 to London (and later Brussels.) They even had sales as low as $49 across the Atlantic. Of course, one had to pay for luggage ($2 per bag!) headphones, meals, etc. But eastboundm who needed a movie or food? Just (try to) sleep….

I once had the dubious please of spending 5 hours each way between Gatwick and Sharm El Sheik in the non-reclining very last row both ways and with the seat in front about 18 inches from my face. Worse flights of my entire life. To sweeten the deal they smashed half my diving gear on the way out and flat blank refused to even enter into a discussion about compensating me for it.

Good riddance to bad rubbish. Perhaps this level of service could have something to do with their demise. I’ve certainly avoided having anything to do with them since.

I flew on Monarch in 1984 to Malaga, Spain when I was 13, at 11pm there and 5am back. I believe it was a BAe (BAC) 1-11. My seat belt was held to the seat by a few threads and the cooked British breakfast came with foil hand-crimped around the container. I could tell it was a budget airline even with my then, limited flying experience.

I never travelled on Monarch, for the simple reason that they cancelled the flights I was booked on TWICE. The first was three weeks before we were due to fly, the second only a week before, both times we were forced to make hurried rearrangements to save our holiday. After the second cancellation, we vowed never to book Monarch again. I’m not saying that my refusal to fly with them caused their failure, but it does make me wonder how many other potential passengers took the same line as me.

Two additional factors in Monarch’s demise: it was bought by a firm of corporate raiders in 2014 and likely asset-stripped; the collapse in the value of the pound sterling after the referendum to leave the European Union meant a 20% increase in the cost of those supplies (including jet fuel) that it bought priced in dollars.

TWA doesn’t really belong on that list. Its demise can easily be traced Carl Icahn both from his saddling TWA with debt and the “the Karabu deal” when he left. TWA 800 didn’t help of course.

I might have mention this before but the last comedy album from the British troupe “Not the 9 o’clock News (You kinda had to be there)” devoted all of side B to an opera about Freddy Laker. It was funny but also not a disrespectful tribute to Sir Freddy.

I had a chat with a pilot for Norwegian, who told me that the ‘low wage crews’ story was unfairly based a Bangkok route’s crew being Thai. He was ex Aer Lingus and was unequivocally happy with conditions, but he was older — perhaps younger pilots digging themselves out from debt will have a different perspective. He also said one or both ends (my memory is hazy) of the PVDBFS route had zero landing fees, sponsored to promote tourism and fueling for the trip cost $2500, so once 70 seats were filled, the route broke even.

As a passenger, the experience was if anything slightly superior to riding Aer Lingus. ‘Spartan but adequate’.